Apart from the cookie-cutter risks everyone is required by law to disclose, the Winklevoss Bitcoin Trust prospectus contains a series of unique risk factors that would make even Bernie Madoff cringe. One of those risks, indicated as my favorite below, almost made this post qualify for my ‘Seriously?’ category, reserved for cases of utmost nonsense and near insanity.

All joking aside, the unique virtual currency-related risks listed in the Winklevoss twins’ new Bitcoin fund SEC filing hint at the number and complexity of roadblocks that the crypto-community will need to surmount if it aspires to take digital currencies to the mainstream. On the positive side, this first (technically, second) Bitcoin fund marks Bitcoin’s official entry into the capital markets and could go a long way towards legitimizing it as a commodity.

Here are some of the more salient risks for your edification and enjoyment:

The loss or destruction of a private key required to access a Bitcoin may be irreversible. The Trust’s loss of access to its private keys or its experience of a data loss relating to the Trust’s Bitcoins could adversely affect an investment in the Shares.

The further development and acceptance of the Bitcoin Network and other Digital Math-Based Asset systems, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of the Bitcoin Network may adversely affect an investment in the Shares.

Currently, there is relatively small use of Bitcoins in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in the Shares.

The administrators of the Bitcoin Network’s source code could propose amendments to the Bitcoin Network’s protocols and software that, if accepted and authorized by the Bitcoin Network’s community, could adversely affect an investment in the Shares.

If a malicious actor or botnet obtains control in excess of 50 percent of the processing power active on the Bitcoin Network, such actor or botnet could manipulate the source code of the Bitcoin Network or the Blockchain in a manner that adversely affects an investment in the Shares or the ability of the Trust to operate.

As the number of Bitcoins awarded for solving a block in the Blockchain decreases, the incentive for miners to continue to contribute processing power to the Bitcoin Network will transition from a set reward to transaction fees. The requirement from miners of higher transaction fees in exchange for recording transactions in the Blockchain may decrease demand for Bitcoins and prevent the expansion of the Bitcoin Network to retail merchants and commercial businesses, resulting in a reduction in the Blended Bitcoin Price.

If the award of Bitcoins for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners, miners may cease expending processing power to solve blocks and confirmations of transactions on the Blockchain could be slowed.

The acceptance of Bitcoin Network software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in the Bitcoin Network could result in a “fork” in the Blockchain, resulting in the operation of two separate networks until such time as the forked Blockchains are merged. The temporary or permanent existence of forked Blockchains could adversely impact an investment in the Shares.

Intellectual property rights claims may adversely affect the operation of the Bitcoin Network.

The Trust’s ability to adopt technology in response to changing security needsor trends poses a challenge to the safekeeping of the Trust’s Bitcoins.

The Trust’s internal systems rely on a Security System that is highly technical, and if such system contains undetected errors, the value of the Shares could be adversely affected.

Security threats to the Security System could result in the halting of Trust operations, the suspension of redemptions, a loss of Trust assets, or damage to the reputation and brand of the Trust, each of which could result in a reduction in the price of the Shares.

A loss of confidence in the Security System and the Trust’s security and technology policies, or a breach of the Security System, may adversely affect the Trust and the value of an investment in the Shares.

Bitcoin transactions are irrevocable and stolen or incorrectly transferred Bitcoins may be irretrievable. As a result, any incorrectly executed Bitcoin transactions could adversely affect an investment in the Shares.

The Trust’s Bitcoins may be subject to loss, damage, theft or restriction on access.

Bitcoins held by the Trust are not subject to FDIC or SIPC protections.

The Trust may not have adequate sources of recovery if its Bitcoins are lost, stolen or destroyed.

Extraordinary expenses resulting from unanticipated events may become payable by the Trust, adversely affecting an investment in the Shares.

The United States tax rules applicable to an investment in the Shares and the underlying Bitcoins are uncertain and the tax consequences to an investor of an investment in the Shares could differ from the investor’s expectations.

Regulatory changes or actions may alter the nature of an investment in the Shares or restrict the use of Bitcoins or the operation of the Bitcoin Network in a manner that adversely affects an investment in the Shares.

If regulatory changes or interpretations of the Trust’s activities require the regulation of the Trust as a money transmitter under the regulations promulgated by FinCEN under the authority of the US Bank Secrecy Act, the Trust may be required to register and comply with such regulations. To the extent that Sponsor decides to continue the Trust, the required registrations and compliance steps may result in extraordinary, non-recurring expenses to the Trust. The Sponsor may also decide to terminate the Trust. Any termination of the Trust in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors. [Excuse me, but building a professional AML and Regulatory Compliance Program is not a one-time expense, but a permanent, recurring expense, or investment, rather.]

If regulatory changes require the regulation of Bitcoins under the CEA by the CFTC and/or under the Securities Act by the SEC, the Trust and the Sponsor may be required to register and comply with such regulations. To the extent that the Sponsor decides to continue the Trust, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to the Trust. The Sponsor may also decide to terminate the Trust. Any termination of the Trust in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

The last two, where we are warned that if the regulatory burden is too onerous the Sponsor may choose to discontinue the Trust (!), are close but do not make it to the hall of fame. Here is the winner:

It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoins in one or more countries, and ownership of, holding or trading in Shares may also be considered illegal and subject to sanction.

Clearly, this fund is not for the faint of heart. But hey, who knows? There’s a wide range of appetites to risk, and being the first mover usually has big advantages.

So good luck, and God bless the Winklevii for further raising the Bitcoin profile.

[CORRECTION: Someone pointed out to me that the Winklevoss Bitcoin Trust was actually the second Bitcoin fund ever, given that Exante launched the first Bitcoin fund on April 9, 2013. So I’ve replaced the final sentence (“So good luck, and God bless the Winklevii for launching the first Bitcoin Fund in the history of the world!”) with the one above. Thanks for letting me know.]